Ferguson et al v. Ruane Cuniff & Goldfarb Inc. et al

Filing 369

ORDER DENYING MOTION TO STAY terminating #341 Letter Motion to Seal. Accordingly, the Court DENIES the Arbitration Claimants' motion to stay. With respect to the issue of those arbitration awards already entered against DST, the status of those awards will be determined at final judgment, either after trial or after settlement. Additionally, the Court grants DST's motion to file under seal an exhibit to their brief regarding the awards that have been entered against DST. In light of this order, the hearing scheduled for February 4, 2022 is cancelled. The Clerk of Court is respectfully directed to terminate the letter motion at ECF No. 341. (Signed by Judge Andrew L. Carter, Jr on 2/3/2022) (ate)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
MICHAEL L. FERGUSON ET AL.,
:
:
Plaintiffs,
:
:
-against:
:
RUANE CUNIFF & GOLDFARB INC.,
:
:
Defendants.
:
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2/3/22

17-CV-6685 (ALC)
ORDER DENYING MOTION TO
STAY

On December 16, 2021, the Arbitration Claimants appealed this Court’s November 18,
2021 injunction to the Second Circuit. ECF No. 339. On December 31, 2021, the Arbitration
Claimants filed a motion to stay the preliminary injunction pending appeal. ECF No. 347. On
January 3, 2022, the Court ordered the DST Defendants to show cause why the Court should not
issue a stay and the Court preliminarily denied the request to stay. ECF No. 349. The Court has
reviewed the parties’ submissions concerning the motion to stay. The Court has also reviewed the
briefing on the issue of those arbitration awards already entered against DST, as well as the joint
letter regarding clarification of the injunction. For the reasons that follow, the motion to stay the
preliminary injunction is DENIED.
When deciding a motion to stay an injunction pending appeal, a court considers the
following four factors: “(1) whether the movant will suffer irreparable injury absent a stay, (2)
whether a party will suffer substantial injury if a stay is issued, (3) whether the movant has
demonstrated a substantial possibility, although less than a likelihood, of success on appeal, and
(4) the public interests that may be affected.” LaRouche v. Kezer, 20 F.3d 68, 72 (2d Cir. 1994)
(quoting Hirschfeld v. Bd. of Elections, 984 F.2d 35, 39 (2d Cir. 1993)); see also Nken v. Holder,
556 U.S. 418, 434 (2009).
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First, the Arbitration Claimants have not shown they will be subject to irreparable harm
absent a stay. Delay in recovery of losses is the potential harm the Arbitration Claimants would
suffer. This is not a harm that “cannot be remedied without a stay.” Church & Dwight Co. v. SPD
Swiss Precision Diagnostics, GmbH, No. 14 CIV 585 (AJN), 2015 WL 5051769, at *2 (S.D.N.Y.
Aug. 26, 2015), aff’d, 836 F.3d 153 (2d Cir. 2016), and aff’d, 843 F.3d 48 (2d Cir. 2016) (quoting
Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007)). Nor is it a harm
that is “not readily remediable monetarily.” Purdue Pharma L.P. v. Endo Pharms. Inc., No. 00
CIV 8029 (SHS), 2004 WL 306591, at *2 (S.D.N.Y. Feb. 17, 2004) (quoting Monsanto Co. v.
Homan McFarling, 302 F.3d 1291, 1296–97 (Fed. Cir. 2002)). Rather, here, money damages can
“provide adequate compensation” because—as the Court held in declining to impose a bond—
harm from the delay in recovery may be remedied by pre-judgment or post-judgment interest on
the arbitration awards. Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002).
Second, the DST Defendants and the plaintiff class will suffer substantial injury if a stay is
issued. The Court stated in the August 2021 class certification order and reiterated in the November
2021 preliminary injunction order that “[a]llowing multiple actions . . . would potentially prejudice
individual class members and would threaten to create incompatible standards of conduct for the
Defendants.” ECF No. 311 at 13. At the November 2021 preliminary injunction hearing, the Court
held that DST would be irreparably harmed by being forced to expend resources defending nonarbitrable claims in arbitrations and other actions.
If the Court stayed the injunction, the risk of these harms would still be present. As the
Second Circuit has held, “the grant of a stay of a preliminary injunction pending appeal will almost
always be logically inconsistent with a prior finding of irreparable harm that is imminent as
required to sustain the same preliminary injunction” and a finding of no serious harm or substantial

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injury would be “a fatal flaw.” Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 227, 235 (2d
Cir. 1999).
Third, the Arbitration Claimants have not demonstrated a substantial possibility of success
on appeal. The standard of review for a grant of a preliminary injunction is abuse of discretion,
and the Arbitration Claimants have not shown that the Court has “rest[ed] its decision on a clearly
erroneous finding of fact or ma[d]e[] an error of law.” Metro. Taxicab Bd. of Trade v. City of New
York, 615 F.3d 152, 156 (2d Cir. 2010) (quoting Almontaser v. N.Y.C. Dep’t of Educ., 519 F.3d
505, 508 (2d Cir. 2008)).
In the aftermath of the class certification order, the Arbitration Claimants continued to
arbitrate individual claims and file new actions to confirm arbitration awards. In the preliminary
injunction order, the Court held that the Arbitration Claimants’ conduct in pursuing claims in
arbitration and other litigation was in frustration of the class certification order. The Court also
held that the injunction is necessary to protect this Court’s jurisdiction. This all remains true.
The Arbitration Claimants have argued that the injunction is deficiently unspecific. The
Court finds that the injunction is sufficiently specific, however, in accordance with Federal Rule
of Civil Procedure 65(d), which states that an injunction shall “describe in reasonable detail—and
not by referring to the complaint or other document—the act or acts restrained or required,” the
Court provides further clarification to the injunction’s reference to the Complaint. The Court notes
that this is not a modification to the injunction, rather this is an explanation of the injunction. See,
e.g., Chevron Corp. v. Donziger, 990 F.3d 191, 210 (2d Cir. 2021) (“Surely the district court had
the authority to explain its Injunction while it was on appeal . . . .”). Thus, the Court clarifies the
injunction as follows:
All members of the Federal Rule of Civil Procedure 23(b)(1) class certified by this
Court on August 17, 2021, including the Arbitration Claimants, are ENJOINED
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from instituting new actions or litigating in arbitration or other proceedings against
the DST Defendants matters arising out of or relating to the following allegations:
(i)

That the assets of the PSA (“Profit Sharing Account”) were invested in a
reckless and imprudent manner by Ruane Cuniff & Goldfarb Inc.
(“Ruane”), to the severe detriment of the DST Systems, Inc. 401(k) Profit
Sharing Plan (“Plan”) (and thereby, its participants).

(ii)

That, with respect to the retirement savings of Plan participants, Ruane
(under the oversight and with the consent of DST Systems, Inc. (“DST”)
and the Advisory Committee of the DST Systems, Inc. 401(k) Profit
Sharing Plan (the “Advisory Committee Defendants”)) gambled with these
Plan assets by failing to appropriately diversify the investment of the Plan’s
assets and pursuing risky, inappropriate investment strategies, while the
Compensation Committee of the Board of Directors of DST Systems, Inc.
(the “Compensation Committee Defendants” and, together with DST and
the Advisory Committee Defendants, the “DST Defendants” ) failed to
fulfill their duties to supervise the Advisory Committee Defendants. In
addition, the Plan participants were not provided with meaningful and
timely guidance regarding the nature of the investments held in the PSA, or
any specific or meaningful and timely information regarding the investment
objectives or investment components of the PSA.

(iii)

That Ruane and the DST Defendants (“Defendants”) have engaged in and
continue to engage in severe breaches of fiduciary duty with respect to the
investments in the PSA and non-PSA portions of the Plan, in violation of
the Employee Retirement Income Security Act (“ERISA”) § 404, 29 U.S.C.
§ 1104, by failing to (a) discharge their duties with respect to the Plan solely
in the interest of the participants and beneficiaries for the exclusive purpose
of providing benefits to participants and their beneficiaries, and defraying
reasonable expenses of administering the Plan; (b) discharge their duties
with the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character
and with like aims; (c) diversify the investments of the Plan so as to
minimize the risk of large losses; and/or (d) monitor the performance of
other fiduciaries to the Plan in a prudent and reasonable manner.

(iv)

That Defendants are liable for breaches of their fiduciary duties, violations
of ERISA’s prohibited transaction rules, and co-fiduciary breaches and
liability for a knowing breach of trust.

(v)

That Defendants are liable to restore the losses that have been suffered as a
direct result of Defendants’ breaches of fiduciary duty, violations of
ERISA’s prohibited transaction rules, and/or co-fiduciary breaches, and are
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liable for all recoverable damages and any other available equitable or
remedial relief, including prospective injunctive and declaratory relief, and
attorneys’ fees, costs and other recoverable expenses of litigation.”
To reiterate what the Court made clear in November, the injunction covers any pending
and future arbitrations and actions. Additionally, the Court’s oral decision on the preliminary
injunction discussed that the injunction covers arbitrations concerning class members’ individual
claims, actions to confirm awards won in those arbitrations, and the claims in the Canfield and
Mendon cases.
As they argued when opposing the preliminary injunction motion, the Arbitration
Claimants again suggest that the preliminary injunction order exceeds this Court’s authority by
enjoining parallel proceedings, including federal proceedings. The Court considered their
arguments and addressed the Court’s authority to do so in the ruling on the preliminary injunction.
As the Court noted there, the Court does not intend to disrespect the Western District of Missouri’s
authority and jurisdiction, however, the Second Circuit’s clear ruling on this issue compelled the
Court to issue the preliminary injunction order and compels the Court to deny this stay. As the
Court has certified a mandatory class, the claims of class members should be handled and resolved
in this class action.
Fourth, the public interest weighs against a stay. The Arbitration Claimants argue that
federal policy generally favors arbitration, however that policy is not applicable here as the Second
Circuit’s ruling in Cooper v. Ruane Cunniff & Goldfarb Inc., 990 F.3d 173 (2d Cir. 2021) instructs
that the Arbitration Claimants’ claims are not arbitrable. The class certification order and
injunction order held accordingly. Instead, principles of judicial economy favor denial of the stay.
“Considerations of judicial economy counsel, as a general matter, against investment of court
resources in proceedings that may prove to have been unnecessary.” Sutherland v. Ernst & Young

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LLP, 856 F. Supp. 2d 638, 644 (S.D.N.Y. 2012). Further “[t]here is a significant public interest in
conserving judicial and arbitration resources by preventing duplicative proceedings.” Morgan
Stanley & Co. v. Seghers, No. 10 CIV. 5378 (DLC), 2010 WL 3952851, at *7 (S.D.N.Y. Oct. 8,
2010). The class certification order and preliminary injunction expressly intended to eliminate
duplicative litigation; granting the requested stay would amount to a grant of permission for the
Arbitration Claimants and other class members to engage in parallel proceedings, leading to a
waste of judicial resources and inconsistent judgments.
Accordingly, the Court DENIES the Arbitration Claimants’ motion to stay.
With respect to the issue of those arbitration awards already entered against DST, the status
of those awards will be determined at final judgment, either after trial or after settlement.
Additionally, the Court grants DST’s motion to file under seal an exhibit to their brief regarding
the awards that have been entered against DST.
In light of this order, the hearing scheduled for February 4, 2022 is cancelled.
The Clerk of Court is respectfully directed to terminate the letter motion at ECF No. 341.
SO ORDERED.
Dated:

February 3, 2022
New York, New York
ANDREW L. CARTER, JR.
United States District Judge

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